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Forming a Montana LLCMontana LLC Operating Agreement takes a lot of planning. Between the Articles of Organization, business licenses, Annual Reports, and more, there’s a lot to consider. And paperwork and startup costs aren’t the only necessary tasks. You’ll also want to set up your LLC to run smoothly and avoid legal troubles after it’s been registered with the state.

That’s where the LLC operating agreement comes in.

Time-Saving Hack: There are a handful of online LLC creation services that can form an LLC for you and include a free customizable operating agreement. ZenBusiness, though, is the only one that offers a free operating agreement in every package.

 

What is an LLC Operating Agreement?

An operating agreement gives your business structure and official procedures. It designates ownership, establishes operations, defines member responsibilities, and provides legal protection. Essentially, it lays out everything someone might need to know about your LLC. And it’s an internal document, so there’s no filing or fees involved.

Whether you’re starting a multi-member or single-member LLC, we strongly recommend completing an operating agreement. It’ll benefit and protect you for as long as you’re in business.

 

Am I Required to Have an Operating Agreement in Montana?

In Montana, creating an operating agreement is not a mandatory part of LLC formation. Regardless, operating agreements provide an array of important benefits for your company including control over assets, efficient business processes, and legal protection.

When you’re sorting through all the paperwork necessary to start your LLC, the operating agreement – as an optional step – might seem unnecessary, we strongly recommend that you draft one.

 

Benefits of Creating an Operating Agreement

You want what’s best for your business. Months or years in the future, you want it to be a profitable and thriving endeavor. Having an operating agreement in place will set up your LLC for sustained success.

It requires some legwork, but it’s well worth it. Just look at some of the benefits:

  • Officially designates how the ownership is split up (the percentage each member/manager owns), so there are no disputes.
  • Standardizes office and company operations to improve efficiency
  • Outlines the procedures for member additions and resignations, registered agent changes, dissolutions, and more, so there is no confusion.
  • Avoids Montana’s “default rules,” which define baseline procedures for any LLC without an operating agreement and aren’t necessarily the best for your business.
  • Grants you greater respect from Montana courts.

 

Free Montana LLC Operating Agreement

When you first sit down to write your operating agreement, it might seem like a daunting task. It is, after all, an important legal document. Even though the Secretary of State website provides numerous resources for LLCs, none of them pertain to operating agreements. This is because it’s optional and can vary greatly from business to business.

But fear not! There are plenty of free and helpful resources online. Simply search “Montana operating agreement” and you’ll find guides, videos, and (most importantly) templates. While most of these templates are good options, we recommend this one, created by Northwest Registered Agent. It’s an ideal jumping off point to get you started.

Whether you’re using a template or starting from scratch, here’s a quick and easy guide for what to include:

Owner or Member Information: Names and mailing addresses.

Company Information: Your LLC’s name, registered office, and principal office.

Registered Agent Information: The name of your registered agent, their address, and contact information.

LLC Formation: The date you filed or will file your Articles of Organization with the Secretary of State.

Business Purpose: The type(s) of business your LLC will be doing in Montana.

Term: How long your LLC in Montana will be valid, typically until you file for termination.

Capital Contributions: The amount of money each member has invested in the LLC.

Profits, Losses, and Distributions: How income and debts are allocated among members and methods for distributing funds.

Ownership Percentage: How much of the company each member owns.

Management and Roles: The managerial structure and decision-making processes, naming who is in charge or certain operations.

Compensation: How members/managers are compensated and reimbursed.

Bookkeeping: Accounting procedures and member account policies.

Tax Treatment: Whether your LLC will be taxed as a Sole Proprietorship, Partnership, S-Corporation, or C-Corporation.

Member Additions: The procedure for bringing on new members – how they will be admitted, if they’re entitled to income, any expenses they will owe, their roles, etc.

Member Withdrawal: Procedures for the resignation, expulsion, retirement, or death of an existing member.

Amendment Procedures: How your LLC will approve changes to the operating agreement. Usually, it’s through a majority vote by the members.

Dissolution: What happens when you terminate your LLC. How your members will split up the remaining assets or debts.

You don’t always need to include all of the above. If any don’t apply to your LLC, feel free to leave them out. Still, it’s a good idea to cover as many bases as possible. Even if you’re a single-member LLC, you should consider including as many sections as possible to accommodate future changes. Otherwise, years into the life of your business, you may run into a dispute over something you didn’t include, and you won’t be able to fall back on the operating agreement.

When you wrap up your first draft, it’s a good idea to review it to make sure you didn’t miss any crucial details. Each LLC member will also need to review it and provide their approval. Once it’s been ratified by all members, your operating agreement will go into effect. It’s an internal document, so you only need to file it with your other business documents; you don’t need to submit it with the state.

 

Making Changes to Your Operating Agreement

For better or worse, your business is going to change. As you begin doing business in Montana and, hopefully, raking in profits, the LLC will grow and evolve. It will develop different needs and more complicated processes. Keep everything running smoothly but updating your operating agreement as changes occur.

First, all LLC managers/members must approve the change. To seek approval, follow the guidelines you already outlined in your operating agreement for ratifying amendments.

Because it isn’t recorded with the state, modifying your agreement is as simple as making changes to the Word document or PDF you keep in your own files.

For example: your registered agent resigns and, following Montana law, you appoint a registered agent service to take their place. Simply pull up your electronic file, enter the new agent information, save it, and print a copy. Make sure you keep a draft of the previous document as well so you can track the changes you’ve made, just in case the state ever has any questions.

 

Hiring an Attorney

Worried that you might miss a critical detail? Uncomfortable with legal minutiae? If you want to ensure your operating agreement provides for all possible outcomes and disputes, you might consider hiring an attorney to review it or write it entirely.

Some attorneys have a flat rate for drafting an operating agreement; others bill by the hour. Either way, you’ll only need their assistance for a limited period of time. Use a site like Avvo to find the right fit for your business. Avvo’s database lets you sort by location, rate, and more – it even shows Montana lawyers that specialize in LLCs.

 

Hiring an LLC Formation Service

The LLC formation process, with its forms and fees, might make you want to throw up your hands and surrender. Don’t do that! Instead, consider hiring an online service like ZenBusiness or Northwest Registered Agent.

An online service like we mentioned earlier can quickly take care of all your necessary filings. Plus, they’ll create a customized operating agreement for you!

Given the amount of time you would spend drafting an agreement from scratch, a formation service is worth it. Not only will you receive a meticulously researched and crafted operating agreement, but you’ll also be able to spend more time growing your business, planning your next move, or just relaxing.

 

References

The operating agreement may be an optional document, but the state still has rules about what they can and cannot govern.

Montana Code Section 35-8-102 states that an operating agreement has authority over “the conduct of the business and affairs of a limited liability company and the relations among the members, managers, and the company,” and Section 35-8-109 says they “regulate the affairs of the company and the conduct of its business.” Anything not included in the agreement, the law goes on, will be governed by Montana’s default laws.

The operating agreement may have a lot of authority, but there are still things that it’s not allowed to do. The rules, procedures, activities, etc. you create for your LLC cannot override state or federal laws, or authorize illegal activities. Further, your agreement cannot protect you from penalties associated with LLC maintenance. So, for example, your operating agreement can’t make your LLC exempt from filing Annual Reports, and it can’t protect you from administrative dissolution if you don’t file them. Find a complete list of restrictions in Montana Code Section 35-8-109.

Be sure to make your operating agreement as detailed as possible, so you don’t fall under the state’s default laws. As you do, be careful not to contradict established state laws, and you’ll be good to go!


About Aaron Franklin

Frustrated by all the options and aggressive online sales tactics, my team and I created BestLLCServices.com to cut the clutter and bring clarity to entrepreneurs starting a Limited Liability Company. Our focus is on reviewing and comparing the top LLC formation services while also crafting free resources that help you start a business. We sincerely believe finding the right service and free information should be a simple process so you can get started with minimal friction.